To take retail route, banks would need a lot of resource

After focusing on pure health insurance policies for almost three years, Max Bupa Health Insurance Co. Ltd, a standalone health insurance company, has decided to now look at defined benefit policies. It launched its first defined benefit health insurance product, Health Assurance, last month. In conversation with Mint Money, Manasije Mishra, chief executive (designate), Max Bupa Health Insurance, tells why the firm launched its first defined benefit product now and shares his view on the distribution landscape for standalone health insurance companies.

Usually a defined benefit product is much easier to sell. Why did you take three years to launch one?

We were focusing on a range of products in the pure health insurance category. Heartbeat, which is our first health insurance product, is one of its kind. We also took the concept of floater to the next level by covering not just immediate relationships but around 13 relationships with no restriction on the number of members that can be covered under one policy.

Servicing is our strong point, too. Our claims settlement within the 30 days period is 91.43%, whereas the industry average is 80%. In fact, we encourage people to make full use of their policy. We don’t have the concept of a no-claim bonus; we give loyalty points to those who stay. These points can be redeemed for services and products.

So in that sense we have covered a lot of ground and offering a defined benefit product was a natural progression.

But your health insurance is the most expensive in the market.

I think it’s unfair to say that. If you compare the benefits of Heartbeat with other plans you will know that it is quite reasonably priced. Not only does it not have any sub-limit or other caveats, it also does not have a waiting period on some specified illnesses. Even our family floater policies are reasonably priced. We understand that when a family comes together, it means better risk for us and so we price the product accordingly. But if you want to compare prices across the industry, then you must pick up our basic health insurance policy (Health Companion), which is designed keeping popular product features.

Health Assurance has a hospital cash cover, which does not pay cash during hospitalization just like other insurers. Can’t policies pay cash to the insured during hospitalization? Can’t one get an estimate on the duration of stay and compensate accordingly?

Yes that’s a good idea and we can always look at it but there is a slight problem here. When a patient gets hospitalized, he shows his indemnity cover to the hospital and the hospital gets in touch with us. So we know the status of the patient, but in a hospital cash policy that becomes a little difficult because the person gets in touch with us directly.

Health insurance is under-penetrated. This also means the insurers have enough room for innovation. However, the biggest impediment to that is lack of standardization. Outpatient (OPD) policies were launched but they still haven’t taken off. Your comments.

The main problem in OPD policies is pricing and the administration of small claims. How do you price a policy that is likely to have high claims? We can control claims by having various sub limits but what we really need is a good, well organised and managed OPD network. We have informal OPDs and that cause problems because there is no way of administering the claims. Also there are no set clinical pathways like it is abroad. Right now OPD covers are at best bundled along with a larger policy. At Max Bupa, a number of our products have OPD benefits included.

But I think it will change and innovation will be possible once health insurance becomes more popular and we have better negotiating power.

The finance minister had suggested that banks should consider becoming brokers if they want to sell products of more than one insurer and Irda came out with draft guidelines giving three options: continue with one insurer one bank model, or partner with different banks in different states, or banks become brokers. How will it help distribution for you?

I would say the draft guidelines are a forward step. That’s because they at least recognize health insurance companies as a separate entity. Right now a health insurance company is a general insurance (GI) company and as per rules a bank can tie up with only one GI firm. For banks it makes a lot of sense to tie up with a GI company because they are able to sell different types of insurance products. For example, assets financed by the bank can be insured through the bank—a fire insurance policy along with a home loan. So I feel the draft guidelines are a step forward for standalone health insurance companies. The new regulations will definitely create new opportunities to promote health insurance.

However, there could be challenges in implementing the geographical division. Bancassurance essentially means getting into a tight relationship with the partner and this has a huge impact on IT systems, people, training, the way transactions are carried out in bank branches. To have multiple partners across different states implies having to carry out this integration multiple times.

What about brokers?

It’s a good idea, but it may be difficult to implement. Banks always had this option but there are issues. The obligation of a broker is significantly more than an agent and sales staff need to be trained and licensed to sell products from multiple insurance companies. It may be difficult to implement in banks as it requires a lot of time and resources to become brokers for retail. For companies this model offers immense value.